An investigative report by a U.S. committee advises private sector firms not to buy telecom equipment from ZTE, Huawei

After a yearlong investigation, a congressional committee on Monday concluded that Chinese telecommunication equipment vendors Huawei Technologies and ZTE pose a security threat to the U.S., with lawmakers advising U.S. private-sector firms to not buy networking gear from the companies.

The U.S. should view penetration by Chinese telecommunication companies into the U.S. telecom market with suspicion, wrote U.S. Reps. Mike Rogers and C.A. Dutch Ruppersberger of the Permanent Select Committee on Intelligence in a study released on Monday.

"The investigation concludes that the risks associated with Huawei's and ZTE's provision of equipment to U.S. critical infrastructure could undermine core U.S. national-security interests," the study said. The committee added that telecommunication networks are vulnerable to malicious attacks and could expose critical U.S. infrastructure to failure, cyberespionage or cyberattacks.

The committee asked the U.S. government not to acquire equipment from ZTE and Huawei, and also recommended that the Committee on Foreign Investment in the United States (CFIUS) block acquisitions or mergers because of the security threat posed by the companies. The committee has also discouraged private-sector companies from acquiring equipment from the Chinese telecom companies.

The U.S. government needs to pay attention to key companies receiving financial support from the Chinese government, the committee wrote.

"Committees of jurisdiction in the U.S. Congress should consider potential legislation to better address the risk posed by telecommunications companies with nation-state ties or otherwise not clearly trusted to build critical infrastructure," according to the report.

Some of the committee's concerns are legitimate, but details about true security concerns are lacking, said Will Stofega, program director of mobile device technology and trends at research firm IDC.

"If there are security issues what are they? Is there are backdoor on the router?" Stofega said.

The timing of the report is also interesting, considering Huawei is mulling an initial public offering in the U.S, Stofega said.

Additionally, the study may be an effort to protect U.S. networking companies like Cisco, Stofega said.

The U.S. committee said that Huawei and ZTE did not cooperate sufficiently during the investigation and failed to provide sufficient information on operations or relationships with the Chinese government.

ZTE and Huawei shot back, however, saying they fully cooperated with the committee.

"The ranking member of the Committee stated at the hearing that the investigation by the committee 'is not political jousting or trade protectionism masquerading as national security'. Unfortunately, the Committee's report not only ignored our proven track record of network security in the U.S. and globally, but also paid no attention to the large amount of facts that we have provided," Huawei said in its statement.

The report is based on rumors and speculation, Huawei said.

"We have to suspect that the only purpose of such a report is to impede competition and obstruct Chinese ICT companies from entering the US market," Huawei said.

Huawei defended itself by saying it was a Fortune 500 company, and that its products were used by products in 140 countries around the world.

ZTE said its equipment is safe, and that it will work with the U.S. government and companies to ensure its products are safe.

It is noteworthy that, after a year-long investigation, the Committee rests its conclusions on a finding that ZTE may not be 'free of state influence.' This finding would apply to any company operating in China," said David Dai Shu, ZTE's director of global public affairs, in a statement.

The committee did not challenge ZTE's "fitness" to serve in the U.S. market, ZTE said.